I was informed by HMRC today that the £5,000 0% Starting Rate For Savings was abolished in 2016

Chris_Cross

Hi,

I am concerned that I was told during a lengthy conversation over the phone to HMRC that the £5,000 0% Starting Rate For Savings was abolished in 2016 and that the Personal Savings Allowance had replaced the Starting Rate For Savings when it came into force in the 2016 tax year and they do not run alongside each other like I have always been led to believe.

I of course questioned this and referenced many reputable sites including GOV.UK that make reference to the £5,000 0% Starting Rate For Savings and that it runs in conjunction with the £1,000 Personal Savings Allowance even in reference to this tax year 2021/2022. But they were having none of it and would only comment on GOV.UK site stating that this is only still showing on there as they still have to deal with earlier tax years when it was available. Strangely, this information came from staff with supposedly many years HMRC working experience.

As much as I am so sure this information cannot be correct it had me doubting myself today and am a bit concerned about my tax for this year:
This year I am not collecting any work income, but a taxable pension withdrawal income of £12,500 and have bank savings taxable income of around £4,000. In my calculation I am well under paying tax with my allowance of £12,570 (1257L) + £1,000 (Personal Allowance) + £5,000 (0% Starting Rate For Savings) which equates to an allowance of up to £18,570 as long as I keep my pension withdrawal under £12,570.

Can someone tell me that I am not going mad and that the Starting Rate For Savings wasn't abolished in 2016 and that my calculation is correct.

Also if this is misinformation coming from HMRC staff themselves it is somewhat concerning as it would affect my, and no doubt many other peoples, financial decisions for the foreseeable future after receiving that information.

Thanks for any assistance given,
Chris

Dazed_and_C0nfused

You must have got a trainee.

https://taxvol.org.uk/index.php/hrf_faq/can-you-explain-the-0-starting-rate-for-savings-and-the-personal-savings-allowance/

But you have got things slightly wrong.

In my calculation I am well under paying tax with my allowance of £12,570 (1257L) + £1,000 (Personal Allowance) + £5,000 (0% Starting Rate For Savings) which equates to an allowance of up to £18,570 as long as I keep my pension withdrawal under £12,570.

The only allowance you have is the Personal Allowance of £12,570 (assuming you haven't applied for Marriage Allowance).

You aren't able to use the savings nil rate (confusingly known as the Personal Savings Allowance) as you have insufficient income.

The savings nil rate band is only available to those who have used their Personal Allowance and (where available) savings starter rate.

So using your figures your interest will be taxed as follows,

£70 covered by Personal Allowance
£3,930 x 0% (savings starter rate) = £0

You could have an additional £2,070 in interest and still not have to pay tax as it would all be taxed at 0%.

Note in this situation you can expect your tax code to be 1250L not 1257L, that's down to the spare Personal Allowance being used up by the first £70 of interest.  This won't make you pay tax and is correct (assuming the pension income of £12,500 is accurate).

Jeremy535897

I find this guide (and the links in it) the most comprehensive:
https://www.litrg.org.uk/tax-guides/savers-property-owners-and-other-tax-issues/savings-and-tax

Chris_Cross

Thanks DazedandConfused & Jeremy, you've put my mind at rest.  

On this subject is anyone aware of an online personal tax calculator (or app for that matter) that also takes into account savings income into the calculation, I've searched but to no avail so far.

Thanks all,
Chris